Wine Vision: Opportunity and frustration in India

21 November, 2013

ByHamish Smith

The Indian wine market is “bewildering” “frustrating” and “political” but also a “huge opportunity” for wine producers, says a panel of leading experts.

Speaking to the international wine trade at Wine Vision in London, Simon McMurtrie, group CEO of Direct Wines, said “If you think doing business in China is hard, you’ve had it easy compared to India. But the wine business in India is not about the future, it is about now."

Rajeev Samant, founder and CEO of leading Indian wine producer Sula Vineyards, said: “Indians have zero tradition of drinking wine but we do not have zero tradition of drinking. Of a population of 1.2bn, 800m do not drink but among the 400m that do drink is the largest consumer base for whisky in the world. So, all we need to do is move 1% of those teetotalers and whisky drinkers on to wine."

According to Samant, India wine consumption is only 0.1 litre per capita a year, but there has been substantial growth, from 150,000 cases in 2000 to 1.5 million cases this year.

Also among the panel was Reva K Singh, founder and editor-in-chief of Sommelier India Wine Magazine. She said that one stumbling block is wine’s relationship with food as “culturally Indians drink before eating”.

She said: “We do not eat in courses – food comes all at the same time – so we have to show Indians how to drink during a meal. There is no tradition of pairing wine with food.”

The panel revealed news that Delhi’s state policy now encourages people away from spirits, towards lighter forms of alcohol such as beer and wine.

According to McMurtrie, Direct Wine’s business in India continues to grow healthy, despite tax levees for imported goods that currently stand at 150%. “Consumers have been prepared to pay the premium. There are an enormous number of Indians that were living abroad and have come back to India interested in wine.”

Despite being a domestic producer, Samant said he “supported proposals led by Moet Hennessey” that would see an accelerated reform of the duty system.

India has free-trade agreements with over a dozen countries in Asia but EU goods face levees of 150% until 2016, when it will drop to 90%.

Samant said a three-tier system is being discussed that would see the market’s cheapest wines – which tend to make up the bulk of imports – remain at a 150% levee but wines over €3 would drop to a 100% duty multiplier, and the rate for wines over €7 would fall to 50%.

The panel agreed that international wine companies looking to gain a footing in India should deploy a "mixed plan" of imported wine and domestic investment, which is one way to offer competitive and luxury options to the market, while keeping onside with state governments.

Moet Hennessy’s investment in its Indian Chandon – one of six Chandon wines made around the world – was said to be a good example of this strategy.

The local sparkling wine, which sells for around $20-22 to ‘Millennial’ consumers in Delhi and Mumbai, is positioned at around half the price of the company’s import tax-hit Champagne brands.

It is estimated that domestic wine makes up around 80% of wine consumption in India, thus grape growing is an important industry. “Politicians are very pro-farmer – if you are farmer friendly you have access to government offices,” said Samant.

McMurtrie added: “The government does not care about whether there is international wine or not. They care about winning votes from the farmers.”

The panel agreed that wine companies should not treat India as one market as each state had its own arrangement for retail and distribution, and added that investment in infrastructure and logistics was important for progression.

McMurtrie said “investment is needed across the supply chain” and advised producers to “avoid bribes because it will become a slippery slope”.

Singh added that “40 degrees heat for 6-7 months of the year is not ideal” conditions for transporting wine and Samant said: “Pay up front for air conditioning but as far as the courier [across India] is concerned, you are out of luck, air conditioned trucks in India are not going to happen.”

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Comment

The wine trade can be divided into two fundamentally opposed camps. on one side, you have the romantic idealists who believe that wine is – or can be – something special, bordering on mystical: an elixir like no other, comparable to the greatest works of art.